The UK’s seventh Contract for Difference allocation round (CfD AR7) were announced on 14 January with a total of 8.4GW of capacity awarded, compared to 3.8GW in AR6.

The result was even higher than the previous record of 7.0GW in AR4. Six fixed-bottom projects equivalent to 8.2GW cleared the auction at a weighted average strike price of £90.91/MWh, compared to 3.4GW in AR6. Five of the projects cleared at £91.20/MWh, while the one successful Scottish project, Berwick Bank Phase B, cleared at £89.49/MW, taking advantage of a new provision that allowed a separate clearing price for Scottish projects. Two floating wind projects equivalent to 193MW of floating wind cleared the auction at £216.49/MWh, compared to 400MW in AR6.

Westwood Insight has analysed the results, pointing out that AR7 saw 20-year contracts on offer for the first time, effectively enabling developers to offer lower upfront bids with overall remuneration remaining the same due to the longer contract tenor. A previous government impact assessment of the reforms proposed and implemented for AR7 had suggested that extending CfD terms to 20 years could deliver a 12 per cent reduction in strike price on a like-for-like basis. Combining this 12 per cent reduction to AR6 prices and the year-on-year increase of 11 per cent observed in AR7 suggests an effective – albeit hypothetical – cost increase of more like 26 per cent.

Despite the strong result, the outcome of AR7 will largely foreclose any possibility of the UK having 43-50GW online by 2030 in line with Clean Power 2030. However, there is always a ‘get out’ and the Clean Power 2030 target is expressed in such a way as to include ‘installed’, ‘under construction’ and ‘committed’ capacity.

Westwood Insight sums out AR7 with the words: “In the end, assuming projects can progress at the strike prices set, the round will represent a positive day for the industry.”

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